What we pay for, when we pay for electricity

Robert Miller

Published 9:26 pm, Saturday, March 9, 2013

More Information

We're No. 4The five states with the highest residential costs for electricity are:1. Hawaii2. Vermont3. New York4. Connecticut5. AlaskaSource: U.S. Energy Information Administration

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When the electric bill comes, we pay it. Faithfully. We like the amenities it provides -- refrigerators, computers, televisions, a lamp shining in the window when we get home at night.

But have you ever wondered why people in Connecticut pay some of the highest electric bills in the country? Do you understand where your power comes from? What about all the different charges and fees on your bill? Is there anything you can do to reduce the tab?

Here's a primer of sorts on what we pay for when we pay for electricity.

A December 2012 accounting from the U.S. Energy Information Administration shows New England as a whole has the highest retail electricity costs of any region in the continental United States.

The reason, she said, is simple: New England doesn't have energy-producing natural resources.

"We don't have natural gas or oil or coal," she said, "We have a little solar, a little wind, a little hydropower."

However, Connecticut Light & Power, the electric utility most of us use, plays no part in making that energy.

That's because after utility deregulation, which occurred in 2000, the utilities stopped producing electricity altogether.

"We're a delivery system," said Mitch Gross, spokesman for CL&P. "We're like Federal Express or UPS."

"It's been that way since 2000," said Michael West, spokesman for United Illuminating. "We've been trying to get people accustomed to that."

Mark Lebel, energy fellow for the Connecticut Fund for the Environment, said, all in all, deregulation has been a good thing with more competition in the energy market. "The wholesale market for energy has changed."

Today, people can buy electricity from the utilities, which purchase it at what's called the standard rate -- now .076150 cents per kilowatt hour. About half the people in the state still do that.

But consumers can also chose from a host of different companies. Some promise lower rates than the utilities offer. Some -- like Community Energy, the provider I use -- means I pay more.

For that extra charge, I support a company that markets electricity generated by sun and wind.

The state has a website -- Ctenergyinfo.com -- that consumers can go to look at the different companies and what they offer.

Stratton said, however, that people should study the offers carefully. Some offer lower rates when you sign up, then increase them a few months later.

"Do your homework," she said.

Stratton also said the state is considering holding an auction of sorts for the half of the people who still buy electricity at the standard rate via the utility.

One of the supply companies could bid for that block of users, she said. The winning bidder would get a lot of new customers who would get electricity at a lower rate.

The winning bidder would also pay the state for allowing it to tap into that market.

A look at one bill

My CL&P bill for January and February says I used 468 kilowatts of electricity. I have a small house. The state average is about 700 kilowatts, Stratton said.

That means what I pay for the actual electricity I use, including the extra charge for Community Energy, was $40.27 on my last bill. That's about $5 less than what I paid CL&P for bringing it to me.

That simple breakdown is on the front of CL&P bills. The utility's delivery charges are on the back.

In January and February, CL&P charged me $9.22 for bringing electricity over large transmission lines, based on the kilowatt hours I use.

It charged me another $16 a month just because I'm hooked up to its service. Everyone pays that $16, every month, regardless of how much power they use.

Again, based on the kilowatt hours I use, CL&P charged me $12.90 to bring electricity to my house in January and February.

There are three smaller delivery costs. One, 89 cents, is for recovered costs -- what CL&P gets to charge its customers for selling the Millstone power plants after deregulation.

The final fee of $2.04 is the combined public benefit charge. That covers several things. It pays for programs that promote energy efficiency in Connecticut. It helps people in tough financial straits pay their electric bills and helps cover unpaid bills.

Where it comes from

Here is the good news. Electricity costs are going down. In large part that's because of the boom in natural gas production in the U.S.

Stratton said the state gets about half its power from generating plants fired by natural gas.

With drilling companies now releasing vast amounts of natural gas from the Marcellus Shale -- a geographic formation under Ohio, Pennsylvania, New York, Maryland and West Virginia -- natural gas prices have gone down. Stratton said all indictions are they will stay down.

And because the price of natural gas is less, the cost of generating electricity with it has gone down as well.

"Wholesale prices for electricity are lower than they have been since 2003," said Marcia Blomberg, spokeswoman for ISO New England, which took on the job of managing the wholesale energy market in New England after deregulation in 2000.

LeBel, of the Connecticut Fund for the Environment, said there are no guarantees natural gas prices will remain so low. But the models that are available, he said, show natural gas prices should stay down. So should electricity costs in Connecticut.

Stratton also said the small fee for recovered costs of the Millstone plant will go away in 2014, reducing what people pay CL&P for power. And, she said, because CL&P completed a major transmission system from Middletown to Norwalk, the congestion fees have declined as well.

How to cut your bill

The great frontier for reducing energy bills in the future is the simplest -- use less electricity.

Stratton said Connecticut used to lead the country in the amount of money it allocated for energy efficiency programs. It's now sixth.

"We let other states get ahead of us," she said. "And legislators took money set aside for energy efficiency and put it in the General Fund."